Payments and the sharing economy

Software platforms and marketplaces now play a pivotal role in the democratisation of e-commerce and the rise of the sharing economy.

It’s never been easier to set up shop and start selling products, services, skills or other assets online, even for sole traders with minimal startup capital. And as for consumers, a sea of choice is usually just a swipe away, irrespective of geographic location or how niche the industry is.

As the sharing economy continues to grow from strength to strength — PwC estimates it’ll be worth $335 billion by 2025 — so will software platforms and marketplaces. They are, after all, the infrastructure that makes it all happen.

But global growth and success also create unique challenges, chief amongst these is payments processing. In fact, our recent study shows that payments is a hot area right now for disruption to the marketplace and end-users are becoming increasingly used to expecting a multitude of payments methods handled from just about anywhere in the world.

Payments for software platforms and marketplaces

Handling payments is challenging at the best of times. But it’s even more so in today’s global context and the potential that cross-border e-commerce growth holds for any ambitious business model.

Aside from the often disparate cultural and economic realities in different parts of the world, there are also operational challenges to contend with. These include managing risk, splitting money between different accounts, currency conversions and compliance with a growing body of complex rules.

Unsurprisingly, many software platforms and marketplaces feel uneasy about handling payments on behalf of third parties. Typically, they devote most of their time and energy to developing and improving their website and apps, which means they tend to lack the expertise, resources and — let’s face it — the appetite to deal with payments and all that this entails in-house.

But then again, a platform’s main appeal is that it makes merchants’ lives easier by handling complex operational and administrative tasks on their behalf. It’s a business model that “creates value by facilitating exchanges." Taking payments out of the equation shifts the burden back on users that can make the platform less appealing, hinder further growth and, ultimately, devalue the brand.

So does this mean that platforms are damned if they do and damned if they don’t?

Not necessarily.

Specialist payment products: the best of both worlds

Partnering with the right payment services provider (PSP) allows platform businesses to offer sophisticated payment functionality without getting hamstrung by complex issues they cannot — and don’t want — to take on.

Herein, the benefits of specialised products such as Paysafe’s Turnkey go beyond simply offering payment processing capabilities. They also add value in other ways.

Easy to deploy

Partnering with a PSP avoids the need to set up an in-house payments infrastructure — a process that can be fraught, time-consuming and costly.

Case in point, deploying Turnkey simply involves integrating a secure API suite into the current software infrastructure. In addition, an integration team is on hand to facilitate the implementation process and address any issues as quickly as possible.

This means software platforms and marketplaces can focus on their core business instead of having to divert funds and resources to building integrations from scratch, applying for an EMI licence and hiring a team of risk management and compliance professionals.

Complete control over the user experience

Specialist payment products like Turnkey are usually white-labelled and work seamlessly, which means users aren’t diverted to a third party website when it’s time for payment.

Payments can easily introduce friction, which frustrates customers and can result in lost business opportunities for merchants. By processing payments on-site, software platforms and marketplaces can stay in control of every aspect of the user experience and ensure it isn’t being disrupted.

An additional revenue stream

Payments API pricing models vary — ranging from flat pricing to revenue sharing. Choosing the right PSP to partner with allows software platforms and marketplaces to control the pricing policy. In turn, this is an opportunity to add another revenue stream to the business.

The operational benefits of specialised payment solutions

Of course, the operational benefit from a payment processing solution is especially important, as these can be key pain points that may make software platforms and marketplaces reluctant to offer payment functionality.

The right product can help software platforms and marketplaces stand out by offering merchants and customers a superior user experience that will encourage them to keep coming back.

Merchant onboarding

As important as know your customer (KYC) and know your business (KYB) due diligence is, time truly is of the essence. Now more than ever, people expect near-immediate responses. Slow onboarding creates friction and causes frustration, which can leave a lasting negative impression.

PSPs have the expertise and tools to speed up the process considerably. Paysafe’s Turnkey, for instance, provides real-time onboarding, which means merchants can start transacting almost immediately instead of having to wait several working days for approval.

Smooth payment acceptance across borders

Payment acceptance is deceptively simple. Aside from secure processing and avoiding chargebacks and other issues, relevance is also crucial.

Customers tend to abandon transactions if they cannot pay using the method they prefer. This can vary wildly from one country to another. For instance, while credit cards are usually the preferred payment method in the US, Germans still prefer payment by invoice. There is an uptake in the Nordics for stage payment plans and Sub-Saharan Africa is seeing mobile payments gain in popularity.

But implementing a large number of options isn’t always feasible, as the return may not justify the cost of implementation.

Here again, PSPs can help by advising on the best mix of alternative payments to deploy. Case in point, Paysafe’s Turnkey has a whole suite of alternative and localised payment methods. What’s more, it can process more than 100 currencies across 150 countries, which makes expanding into new regions easier and quicker.

Fraud detection and risk management

While trust has been key in ecommerce since day one, the sharing economy has given it added significance. Transactions that start online are often completed face-to-face. So risk management and fraud detection are more important than ever.

One study found that only 8% of consumers would be happy to carry out a sharing economy transaction without assurances about the merchant’s identity, which means having robust fraud detection and risk management tools in place isn’t just sensible — it can actually drive competitive advantage.

Summary

As the sharing economy continues to grow across markets and borders, competition between software platforms and marketplaces will only become more stiff.

Consumers are increasingly discerning. They have no problem abandoning transactions if they’re not happy with the payment methods on offer. In turn, merchants will abandon a software platform or marketplace equally quickly if doesn’t give them the tools they need to succeed.

Ultimately, if software platforms and marketplaces want a bigger slice of market share, they need to make transacting as effortless as possible. And this means offering secure, frictionless and seamless payment functionality that’s in step with what users want.

By partnering with an experienced payment service provider like Paysafe, they can make this process easier without losing sight of their core business. Indeed, they can turn the payment processing challenge into a competitive advantage that allows them to offer a superior product and fuels further growth.